Standard Motor Products, Inc. Announces Third Quarter 2002 Results and a Quarterly Dividend
NEW YORK--Oct. 24, 2002--Standard Motor Products, Inc. , an automotive replacement parts manufacturer and distributor, reported consolidated net sales for the third quarter of 2002, of $182.6 million, $25.9 million, or 16.5%, higher than consolidated net sales of $156.7 million during the comparable quarter a year ago.Earnings from continuing operations for the third quarter of 2002 were $9.8 million, or 72 cents per diluted share, compared to $3.7 million, or 32 cents per diluted share for the third quarter of 2001.
Consolidated net sales for the nine month period ended September 30, 2002 were $488 million, slightly lower than net sales of $492.6 million in the comparable period in 2001. Earnings from continuing operations for the nine month period ended September 30, 2002 were $14.1 million, or $1.14 per diluted share, compared to $6.6 million, or 56 cents per diluted share, for the comparable period of a year ago.
Mr. Lawrence Sills, Standard Motor Products, Inc.'s Chief Executive Officer, said, "We are very pleased with our sales improvement in the third quarter of 2002. Temperature Control's consolidated net sales increased $15.7 million, or 21.4% compared to the prior year's third quarter, with the first warm summer in four years. Engine Management's consolidated net sales also improved, up $9.1 million, or 12.3% in the third quarter of 2002 compared to 2001's third quarter, assisted by previously announced new accounts."
Mr. Sills further stated, "Gross margins for the third quarter of 2002 increased 1.5 percentage points to 27.2% over the comparable quarter of last year. Year-to-date gross margins improved by 1.9 percentage points to 25.8%. By segment, year-to-date gross margins in Engine Management improved 3.1 percentage points to 30.0% and in Temperature Control improved 1.8 percentage points to 20.7%. The improvements in gross margins reflect the return to more normal production levels and our ongoing cost-reduction activities."
"We continue to concentrate on reducing capital employed in the business. Net inventory has been reduced $15.5 million compared to September 2001 levels, bringing our total inventory reduction since January 2001 to $72.5 million. In addition, our total borrowings of $208.4 million represent a reduction of $35.4 million compared to the September 2001 level", Mr. Sills noted.
The Company recently conducted a review of its contingent liabilities associated with asbestos. As previously disclosed in its periodic filings with the Securities and Exchange Commission, in 1986 we acquired the EIS brake business, which we subsequently sold in March 1998. In accordance with the purchase agreement for this business, we agreed to assume liability for all new asbestos-related claims filed after September 1, 2001. In order to quantify its possible future asbestos liability, an actuarial study by a leading actuarial firm with expertise in assessing asbestos-related liabilities was engaged to estimate the potential claim liability over approximately the next fifty years. According to the actuarial study, indemnity payments are estimated to peak at $1.7 million in 2003, tapering off to below $1 million by 2015. The gross, non-discounted amount of indemnity payments for the entire fifty-year period is estimated to be $27.3 million. Based on the results of the actuarial study, the Company has determined to take a pre-tax charge in the third quarter of 2002 of approximately $22.6 million to bring the reserve the Company maintains for potential asbestos-related damages of settlement awards up to this total amount.
As a result of the aforementioned asbestos charge, the net loss for the three-month period ended September 30, 2002 was $7.1 million, or 42 cents per diluted share, as compared to $3.7 million of net earnings, or 32 cents per diluted share, for the comparable 2001 quarter. With respect to the nine month period ended September 30, 2002, the net loss was $19.9 million, or $1.16 per diluted share, after giving effect to the asbestos charge and $16 million for the cumulative effect of an accounting change related to goodwill in 2002. This compares to $3.8 million of net earnings, or 33 cents per diluted share, for the comparable 2001 nine month period. The nine month period ended September 30, 2001 included a $2.8 million extraordinary loss on the early retirement of debt.
The Board of Directors has approved payment of a quarterly dividend of nine cents per share on the common stock outstanding. The dividend will be paid on December 2, 2002 to stockholders of record on November 15, 2002.
Standard Motor Products will hold a conference call at 10:00 AM, Eastern Time, on Friday, October 25, 2002. The dial in number is 1-800-540-0559. The playback number is 1-800-934-2729 and the ID# is J405.
Under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Standard Motor Products cautions investors that any forward-looking statements made by the company, including those that may be made in this press release, are based on management's expectations at the time they are made, but they are subject to risks and uncertainties that may cause actual results, events or performance to differ materially from those contemplated by such forward looking statements. Among the factors that could cause actual results, events or performance to differ materially from those risks and uncertainties discussed in this press release, including, without limitation, those related to estimates of asbestos-related contingent liabilities, and detailed from time-to-time in prior press releases and in the company's filings with the Securities and Exchange Commission, including the company's annual report on Form 10-K and quarterly reports on Form 10-Q. By making these forward looking statements, Standard Motor Products undertakes no obligation or intention to update these statements after the date of this release.
STANDARD MOTOR PRODUCTS
CONDENSED CONSOLIDATING BALANCE SHEETS
(Dollars in thousands)
ASSETS
September December,
30, 31
2002 2001
--------- ---------
Cash $9,672 $7,496
Marketable securities 7,200 -
Accounts receivable, gross 197,225 122,327
Allowance for doubtful accounts 5,522 4,362
--------- ---------
Accounts receivable, net 191,703 117,965
Inventories 161,709 177,291
Other current assets 30,978 26,197
--------- ---------
Total current assets 401,262 328,949
--------- ---------
Property, plant and equipment, net 106,854 101,646
Goodwill 20,017 38,040
Other assets 37,313 40,794
--------- ---------
Total assets $565,446 $509,429
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $3,229 $4,075
Current portion of long term debt 4,242 1,784
Accounts payable trade 47,130 26,110
Accrued customer returns 26,177 18,167
Other current liabilities 65,972 50,457
--------- ---------
Total current liabilities 146,750 100,593
--------- ---------
Long-term debt 200,879 200,066
Postretirement & other liabilities 52,064 23,083
--------- ---------
Total liabilities 399,693 323,742
--------- ---------
Total stockholders' equity 165,753 185,687
--------- ---------
Total liabilities and stockholders' equity $565,446 $509,429
========= =========
STANDARD MOTOR PRODUCTS, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
THREE-MONTHS ENDED NINE-MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2002 2001 2002 2001
----------- ----------- ----------- -----------
NET SALES $182,625 $156,707 $488,034 $492,581
COST OF SALES 133,023 116,439 362,164 374,807
----------- ----------- ----------- -----------
GROSS PROFIT 49,602 40,268 125,870 117,774
SELLING, GENERAL &
ADMINISTRATIVE
EXPENSES 32,510 31,066 96,290 95,628
----------- ----------- ----------- -----------
OPERATING INCOME 17,092 9,202 29,580 22,146
OTHER INCOME
(EXPENSE), NET 969 1,081 1,725 1,540
INTEREST EXPENSE 3,606 4,795 10,877 13,962
----------- ----------- ----------- -----------
EARNINGS FROM
CONTINUING OPERATIONS
BEFORE TAXES 14,455 5,488 20,428 9,724
INCOME TAXES 4,623 1,740 6,333 3,082
----------- ----------- ----------- -----------
EARNINGS FROM
CONTINUING OPERATIONS 9,832 3,748 14,095 6,642
LOSS FROM DISCONTINUED
OPERATION, NET OF TAX (16,918) - (18,043) -
----------- ----------- ----------- -----------
EARNINGS (LOSS) BEFORE
EXTRAORDINARY ITEM
AND CUMULATIVE EFFECT
OF ACCOUNTING CHANGE (7,086) 3,748 (3,948) 6,642
EXTRAORDINARY ITEM,
NET OF TAX - - - (2,797)
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE,
NET OF TAX - - (15,985) -
----------- ----------- ----------- -----------
NET EARNINGS (LOSS) $(7,086) $3,748 $(19,933) $3,845
=========== =========== =========== ===========
NET EARNINGS (LOSS)
PER COMMON SHARE:
BASIC EARNINGS FROM
CONTINUING OPERATIONS $0.82 $0.32 $1.18 $0.56
DISCONTINUED
OPERATION (1.41) - (1.52) -
EXTRAORDINARY ITEM - - - (0.23)
CUMULATIVE EFFECT
OF ACCOUNTING CHANGE - - (1.34) -
----------- ----------- ----------- -----------
NET EARNINGS (LOSS)
PER COMMON SHARE -
BASIC $(0.59) $0.32 $(1.68) $0.33
=========== =========== =========== ===========
DILUTED EARNINGS
FROM CONTINUING
OPERATIONS $0.72 $0.32 $1.14 $0.56
DISCONTINUED
OPERATION (1.14) (1.22)
EXTRAORDINARY ITEM - - - (0.23)
CUMULATIVE EFFECT
OF ACCOUNTING
CHANGE - - (1.08) -
----------- ----------- ----------- -----------
NET EARNINGS (LOSS)
PER COMMON SHARE -
DILUTED $(0.42) $0.32 $(1.16) $0.33
=========== =========== =========== ===========
Weighted Average
Number of Common
Shares 11,954,928 11,797,961 11,900,800 11,764,870
Weighted Average
Number of Common and
Dilutive Shares 14,859,401 11,893,848 14,805,121 11,816,646